OM1 - Module 7 Review

Why will a business organization use key performance indicators (KPIs)?

• An organization runs by departments, so KPIs are a way to shift responsibility to departments.

• To effectively operate, an organization must isolate its most important financial numbers.

• No organization can look at everything, so it must focus on the most important issues.

How does the expression "You get what you measure" apply to employee performance incentives?

• If you set the measure for packages shipped, more packages will ship but some will be missing items.

• If you set the measure for reduced fuel use by delivery drivers, they will drive their routes more efficiently.

• If you set the measure for customer service satisfaction ratings, customer service response will improve.

In the Soviet oil drilling contest, the winning team is chosen by the _____.

• number of successful wells

• number of meters drilled

• amount of oil found

• lowest cost per meter drilled

While research in the 1950s suggested that businesses should have seven KPIs, plus or minus two, why should a modern business have as many as 20?

• Businesspeople are more savvy now so they need many more KPIs as a result.

• If a business does not have enough KPIs, it can miss important measures.

• It allows a business to take the best advantage of the Pareto Principle.

Should customer satisfaction be part of a business's balanced scorecard?

• Yes, the numbers reflect how healthy the business is outside of its financial numbers.

• No, customer satisfaction cannot be reduced to numbers on a scorecard.

• Yes, but only if the measures of customer satisfaction are the same as those used to evaluate employees.

You are interested in your customer satisfaction outcome measures. What is an example of an outcome measure you would examine?

• the market share your product enjoys in the market for your products and similar products

• the selling price of your company's products versus your competitor's selling price

• the percentage of products returned by your customers in a given month

Which is not an example of a leading measure with respect to customers?

• customer satisfaction

• number of returned items

• percent of on-time deliveries

• market share

Your company has a strategy of sacrificing short-term profits and cash flows for capital improvements. What does current research suggest about the outcome for your company?

• Your company should be more robust and profitable in the long-term.

• Your company will not have a future if it only invests in the now.

• Your company should choose either cash flows or profits to surrender, not both.

If your company truly considers employees to be resources, which measure will you have on your balanced scorecard?

• the leading measure of money spent on R&D

• the leading measure of employee productivity

• the leading measure of money spent on employee training

Why is research and development (R&D) considered an internal process measure?

• It shows you how much money you spent internally on R&D in a given period in order to keep R&D costs in line with other internal costs.

• It lets you separate R&D spending from external costs, so financial managers can target the spending in times of business shortfall.

• It tells you how well spending money internally on R&D turned into customers buying your new and innovative products.